Can building societies help to educate youngsters about money?

The Building Societies Association asked me to look at whether the mutual sector will help to deliver the education curriculum mooted by the government earlier this year – here’s my verdict

 

Iona Bain

It was an announcement made four months ago, the culmination of fierce lobbying by charities, MPs and respected bodies in the financial sector. But the news that money lessons will soon have to be taught in all schools is still reverberating around the industry.

Up to now, financial education has been an ad-hoc affair – in England, at least. Scotland, Wales and Northern Ireland have technically been ahead of the game for many years.

But the Department of Education has finally caught up with its neighbours, and perhaps not a moment too soon. In this economic maelstrom, few doubt that the next generation need all the help they can get. As well as depressed interest rates and stagnant wages, young people face their own unique set of financial obstacles. Numerous studies show that bumped-up tuition fees will leave graduates with a debt pile worth over £50,000. A first-time buyer could be waiting until their late 30s to get on the property ladder – if the bank of Mum and Dad can’t help.

It’s little wonder that three quarters of the population are in favour of financial education, according to a poll carried out by the Nationwide Building Society. Half the population think that lessons on money management would have had “a positive impact” on their situation if they had been around before now.

But there are so many questions surrounding this landmark decision; what exactly will be on the syllabus, and who is best placed to teach it?

That uncertainty could be down to the way this curriculum has been drawn up. The Department for Education has stated that school pupils must be “equipped with the financial skills to enable them to manage their money on a day-to-day basis as well as to plan for future financial needs”. That means learning about budgeting, as well as the basic financial services that young people are likely to encounter at some point. Pupils will also have to get to grips with wages, taxes, credit and debt, as well as the more ‘sophisticated’ financial products that their parents may still be struggling to grasp.

But that is as far as it goes in suggesting how money is taught. In this way, the new Draft Curriculum follows arrangements already seen in Wales and Scotland, where teachers can decide what resources they use and how to cover the basics.

But could building societies, now attracting more support following the traumatic fallout of the banking crash, prove helpful? Many mutuals are already working with young people to improve their financial literacy. The Nationwide Education website, which has plenty of interactive resources, has received over 35 million hits since its inception in 2008. But there are plenty of smaller, local building societies, demonstrating various strategies to engage children with this thorny topic.

For instance, Cambridge Building Society has hosted “Dragon Dens” style events to ensure local school children understand the world of work, similar to the Progressive Building Society’s Young Enterprise Programme. Experts at Ipswich Building Society have gone into local schools as part of a Money Day programme, offering games and Debt Cred sessions. The Beverley and Newbury Building Societies have even set up ‘junior banks’ to get children learning about key financial products through practice.

So however teachers decide to broach this tricky subject when it becomes compulsory next year, they can, at least, be assured they are far from their own.

What do you think? Let me know in the comments section below.

4 Comments

Filed under Personal Finance Education

4 Responses to Can building societies help to educate youngsters about money?

  1. I would welcome the opportunity to meet and talk. I am bringing to market Qwiddle – Helping children get smart with money…the digital way. An online piggy bank that teaches children to manage their own money, aim for things they really want, learn through hints and tips and earn money by doing jobs and chores. Your input would be very welcome
    I look forward to hearing from you
    Vanessa

    • Conrad Jones

      In order to educate people about money we first need to understand where “Money” comes from.

      We also need to understand How Banks Work, many people still do not understand How Banks actually work.

      The BBC recently removed a Video by Robert Peston which misled people into thinking that a Bank first receives Deposits from Savers, then use that Deposited Money to lend to Borrowers. This is INCORRECT.

      Mervyn King said:
      “When banks extend loans to their customers, they create money by crediting their customers’ accounts.”

      So it’s not just the Government who creates Money? Correct, Banks CAN create money in the form of digital I.O.Us in their computer systems. A mortgage is a digital I.O.U which the Bank charges interest on and makes First Charge on the Deeds to the Borrower’s House. 97% of our National Money Supply is made up of Private Bank & Building Society created digital money which we use for 99% of our purchases (in value terms).

      So what?

      The reason why it is interesting to understand this is that the cause of our Financial Debt and Asset Price Inflation problems suddenly become clear.

      House Price Inflation is not a result of simple “Supply and Demand”, it is as a direct result of the Private Banking Industries ability and confidence to lend ever increasing amounts to people to buy their Homes. The Value of these Properties has not substantially increased, what has increased is the amount of digital money that Banks can now create due to ZERO Captial Reserve Ratios enforced (or not enforced).

      Back in 1968 – the Captial Reserve Ratio of a Bank would have been set at 20.5%. They need 20.5% of actual cash money (notes and coins) in reserve so that only 80% of the money supply was created by Banks and the other 20% was Publicly created money (interest free at the point of creation). The Gold Standard was in place until 1971. When Nixon took the World off the Gold Standard, the Property Market started to take off encouraging speculators into the Housing Market. Prior to this, the Housing Market just grew gradually with wage increases. As Capital Reserve Requirements were gradually reduced down to 15.9% (1978) then down to 3% (1988), a false economic boom was created, allowing Banks to create more and more digital credit which fuelled the Housing Market. 40% of all Bank Lending goes into the Housing Market, an additinal 32% goes into speculative investments but only 8% goes into genuine productive investments leading to full time productive employment.

      So if Banks Create Money, does this money remain forever? NO.

      When debts are repaid , the “Credit” money is cancelled. Just like tearing up an I.O.U from a friend for a £5 Debt. When the Moeny is repaid, the I.O.U. is no longer valid. So when Banks create Debt and a slower pace than previous debts are being repaid, our money supply shrinks.

      Why is this bad?

      This is bad because with banks creating 97% of our total money supply, it’s the Banks lending decisions that can create economic prosperity with increases in money supply (or at least the illusion of it) or economic depression – when money supply (available credit) is reduced.

      Therefore, the simple rule is:

      LESS DEBT = LESS MONEY
      MORE DEBT = MORE MONEY

      We cannot have less debt without less money so we are forced to live beyond our means or face economic depression, given our Monetary System.

      PositiveMoney.org has more information on this and a solution – if you are interested. They have gained the support of some leading Politicians and Academics who actually understand how our financial system really works. But try explaining this to your local MP and he say things like: “It’s a difficult balance, but the truth is that the issues underpinning the housing market are simple ones of supply and demand.” – that would be true if Banks operated like piggy banks but they don’t. The chief activity of the Banking Industry is creating our money which they then let us rent from them. That’s why Bank CEOs can pay themselves enormous Salaries and Bonuses, becasue the Government (backed by Tax Payers) subsidises the Banking Industry.

      • Conrad Jones

        Correction to my Capital Reserve Figure above for 1988 – was actually 5%, and in 1998 was dropped top 3.1%.

        Summary:
        1968 – 20.5%
        1978 – 15.9%
        1988 – 5%
        1998 – 3.1%
        2013 – ZERO %
        Banks don’t need reserves anymore becasue they are confident that their Politician Friends will ride to their rescue when they over extend themselves, and Tax Payers, Students and the Elderly Saver, will pay the price.

        Today it is ZERO % !!!!

        Banks decide how much capital reserves they need. As they get Government Bail outs – they’ve decided they can be very low indeed.

  2. Conrad Jones

    Incidentally, China’s Reserve Ratio is 20.5% (the same as the UK’s in 1968), so claims that increasing the Reserve Ratio of Banks would collpase the Economy and destroy production are completely invalid as China is not generally regarded as weak Financially or in terms of it’s productive capability.
    China could destroy the United States without firing a single shot purely by cashing in all it’s American Debt, sending Trillions of US Dollars back to the U.S. It chooses not to do this because the United States is it’s biggest Market. Therefore, it would be an act of Financial Suicide to threaten China in any way whatsover (i.e. Trade Embargoes or a ban on Chinese Imports), which is why Obama feels condifent that he can Attack Syrian “WMD” and not Chinese “WMD”.

    Follow the money and Foreign Policy becomes a lot clearer to understand.

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